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Q# 3 . ( 2 0 pts . ) Alliance Corporation is considering investing in a project that will incur an initial investment of $

Q#3.(20 pts.) Alliance Corporation is considering investing in a project that will incur an initial investment of $500,000. The project has a useful life of 5 years. The project's projected free after tax cash flow is $150,000 per year throughout the life of the project. The firm requires a rate of return for similar risk project at 16%. Based on the above information compute the following and determine under each criteria ?()if the firm should accept the project. ?()
a) The NPV
b) The IRR
c) Payback period, the firm's minimum acceptable payback period is 3.5 years.
d) Discounted Payback Period. Minimum acceptable discounted payback period is 4.0 years.
e) Compute the Profitability Index for this investment. What purpose does Profitability Index serve in capital budgeting processes?
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